By Nassim Khadem
Regulators need to stop online companies such as Uber and Airbnb – as well as people using their services – from dodging their tax obligations, says shadow assistant treasurer Andrew Leigh.
In a speech to be delivered to the McKell Institute in Sydney on Tuesday, Mr Leigh will also call on the Abbott government to take the lead in getting global agreement on the amount of tax that would be paid by a multinational to each country in which it operates.
Andrew Leigh also raised concerns about the lack of regulation around the 'collaborative economy' or 'sharing economy'.Credit: Getty Images
US tech giants such as Apple and Google have used loopholes in current international tax laws and avoided paying tax on billions of dollars of sales by routing profits through tax havens such as Bermuda and low-tax jurisdictions such as Ireland.
"It is neither efficient nor equitable to let revenue fall into some dead zone between countries," Mr Leigh says.
Labor MP Andrew LeighCredit: Elesa Kurtz
"One way to address this would be to establish international consensus on the corporate tax base, and then allow countries to compete on the rate."
In an interview with Fairfax Media, Mr Leigh also raised concerns about the lack of regulation around the "collaborative" or "sharing economy", which included services such as Uber and Airbnb.
"The sharing economy needs to be better regulated," he said. "I certainly don't believe that the sharing economy should expand because it's avoiding taxes. It ought to expand on offering a better product to Australians."
He said while services such as Uber and Airbnb offered lower-income Australians benefits – "[they] may not be able to afford [a] taxi home with Christmas presents but can afford an Uber X car" – these companies did not face the same tax and legal requirements that the taxi industry and hotel industry did. This was a concern, given their rapid growth.
"There's an extraordinary number of Australians that have used Airbnb," he said. "There's 9 million empty bedrooms in Australia at the moment. That's a huge number of spare bedrooms for people looking to make ends meet on the mortgage … [regulators] simply need to say that if people are making income that ought to be reportable in tax returns."
The City of Portland reached agreement with Airbnb whereby if someone rents out rooms on Airbnb, the city of Portland must know their address. It makes Portland one of few cities where short-term rentals posted on Airbnb are regulated and taxed in this way, and was a "sensible arrangement", Mr Leigh said.
He will also warn in his speech to the McKell Institute that the Abbott government's decision to abandon Labor policies designed to stop multinationals from profit shifting will result in severe revenue loss.
Mr Leigh says the Coalition has ditched $1.1 billion in measures that were aimed at tackling the problem. This had come on top of 4700 job cuts at the Tax Office over the four years to 2018. So far 3000 of those 4700 cuts have been made, which some internal ATO staff say is affecting revenue collection.
"That's fully one quarter of the agency's people, including as many as 1000 auditors with specific expertise in complex international tax structures,'" Mr Leigh says.
He says Treasurer Joe Hockey should be judged by the additional revenue his announcements deliver.
"Zero new revenue equals zero new action," Mr Leigh says.
He has also cautioned the government against winding back Labor's tax disclosure laws, which from July require the Tax Office to begin publicly publishing the amount of taxable income and tax paid by the nation's largest public and private companies.
Former assistant treasurer Arthur Sinodinos, Finance Minister Mathias Cormann and new Assistant Treasurer Josh Frydenberg have all raised concerns about the laws. There are concerns it gives away too much information about private individuals.
Finance Minister Mathias Cormann told Fairfax Media in an interview in December that the government was reviewing the laws after private business owners complained they may be kidnapped and held at ransom if their tax information goes public.
Mr Leigh, conversely, wants the existing tax disclosure laws to apply sooner than July, and has passed a private member's bill asking for this.
He says the government is spending too much time discrediting the Tax Justice Network report that claimed almost a third of Australia's largest companies are paying less than 10¢ in the dollar in corporate tax and 60 per cent of the ASX 200 have declared subsidiaries in tax havens.
"Whenever tax estimates are published in the public domain, the Abbott government and its backers claim they don't capture the whole picture," he says.
Mr Leigh also took aim at the government's decision to adopt a "common reporting standard" a year later than more than 40 other countries, including major G20 powers such as Britain and Germany. The standard, agreed to by G20 leaders in Cairns in September and again confirmed at the Brisbane summit, will involve banks and other financial institutions setting up systems that allow information to be automatically fed to government agencies.
Mr Leigh said Australia was even behind Bermuda, the Cayman Islands and Jersey, which would start the process for the automatic exchange of information from next year, a year earlier than Australia. Australia has agreed to start in 2017, and have systems in place by 2018.